House Speaker John Boehner has announced that getting the deficit under control is his top priority, but tax increases are off the table. Mr. Boehner's abhorrence of taxes reflects the sentiments of today's Republicans, but it's a radical departure from the party's founding principles.
It was the Republican Party that created America's income taxes.
Republicans organized in the late 1850s to oppose the growing power of Southern Democrats. One of the key policy measures of the antebellum Democrats had been to lower the tariff duties that funded the U.S. Treasury, leaving the government badly strapped for cash by 1860. Republicans were convinced that Democrats were starving the treasury on purpose to destroy the country.
After the Southern Democrats seceded from the Union in 1861, Republicans dominated Congress. Immediately, they reinstated the old tariff duties Democrats had dropped, erecting tariff walls around the entire U.S. economy. But these tariffs could only stabilize the peacetime budget. The financial maw of the Civil War required an entirely new revenue system, and Republicans set out to create it.
Their guiding principle was to spread the burden of taxation evenly throughout society. They believed that the survival of the nation would benefit all Americans, so everyone should support the government to the best of their ability, "not upon each man an equal amount," a leading Republican explained, "but a tax proportionate to his ability to pay."
First, they placed taxes on all manufactured goods. Together with the tariffs, these taxes on consumer goods -- essentially sales taxes -- would fall disproportionately on working-class Americans.
To counteract this regressive tax, Republicans invented the national income tax. This was a wildly new idea in 1861, when most people tallied their income and expenses item to item, rather than thinking of their income as a yearly number. Congressmen shook their heads at the difficulty of figuring out how much money they made in 12 months. But levying a tax on income would guarantee that "the burdens will be more equalized on all classes of the community, more especially on those who are able to bear them," said a senator from a wealthy eastern state when he introduced the novel plan.
Congress adopted the income tax in 1861, placing a tax of 3 percent on incomes over $800. Then in 1862, it made the tax progressive, levying a tax of 3 percent for incomes over $600 a year and of 5 percent for incomes over $10,000. To collect the tax, the Republican Congress created an Internal Revenue Bureau in the Treasury Department.
In 1864, Republicans revised the income tax upward. Recognizing that wealthy industrialists had benefited from war contracts while workers had suffered from wartime inflation, they increased the income tax rates. They set the tax brackets at 5 percent for incomes from $600 to $5000, 7.5 percent for incomes from $5,000 to $10,000, and 10 percent for income over $10,000.
By 1865, 23 percent of the government's revenue came from sales taxes; 20 percent came from the income tax.
Republicans considered their revenue system one of their greatest achievements. Confederates had refused to raise taxes, and their reward had been debt, inflation, and class conflict as poor Southerners complained of a "rich man's war and a poor man's fight." In contrast, Republicans had used financial necessity to bring all Americans together, according to their abilities, to save the nation.
A hundred and fifty years later, Republicans like Speaker Boehner have forgotten their roots.